The Marshall Plan Isn’t the Success Story You Think it Is
The money spent [On the Marshal Plan] totaled over 100 billion dollars in today’s dollars. And given that the American economy was but a small fraction of what it is today, this was an enormous sum.
The rhetoric behind the idea was nothing new. In 1947, it was routine to claim that government spending of the New Deal and World War II had ended the poverty of the Great Depression. That’s not the reality, of course. As economic historian Robert Higgs has shown, the New Deal made the Depression worse . Nor did World War II end the Depression . But at the time, this was a common misperception.
So, if redistributing the wealth worked so well to end poverty in the 1930s, why not do it all again in post-war Europe?
Moreover, it was a winning political strategy for President Truman. As noted by Charles Mee in his book The Marshall Plan:
[Truman needed] some large program that would let him recapture the initiative, something big enough to enable him to gather in all the traditional factions of the Democratic Party and also some middle-of-the-road Republicans, and at the same time, something that would hamper the Republican phalanx.
So, the US government set to work funneling taxpayer dollars to both foreign regimes and to American corporations who could leverage their political influence with foreign regimes to get some of that money.
But here’s the rub. There’s not actually evidence that this worked.
As Thomas Woods notes in this lecture on foreign aid, it’s easy to see why the Marshall Plan has the reputation it does. After all, the Marshall Plan was implemented in the late forties, and during that time, the economies of Western Europe greatly recovered.
But this is a case of mere correlation being woefully insufficient to prove causation.
After all, as Woods further notes:
- “Britain received twice as much aid as West Germany did, but economic growth in Britain dramatically lagged behind that of the Germans.”
- “France, [West] Germany, and Italy began their economic recoveries before they started getting Marshall Aid.”
- “Austria and Greece received a lot of Marshall Aid, per capita, and yet their economic recovery only got under way as Marshall aid was being phased out.”
Woods concludes “given this, I think its increasingly plausible to suggest perhaps the Marshall plan was not responsible for the recovery…what was responsible for the recovery? Well, the return to market economies after the war … there were tremendous wartime economic controls, in all these countries and with the end of the war came the end of those controls.”
And with that came economic prosperity. After all, the German Economic Miracle was based on ending the economic controls of the Nazi-era.
D.W. Mackenzie writes:
Marshall Plan aid consisted of only a tiny percentage of German GDP. Also, the money that West Germany paid in reparations offset Marshall Plan aid. West Germany received military defense from the U.S. and England, but paid substantial fees for this service. The German Economic Miracle began with a radical program of privatization and deregulation, beginning in 1948. This ended the regulatory controls and elaborate tax system imposed by Hitler and his National Socialists.
Foreign aid had, at best, minimal influence on the West German revival. A free and nondemocratic Germany experienced a strong recovery.